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De minimis surrender value of retirement annuity funds increased

03 June 2021 Jenny Gordon, Head: Technical Advice, Investments, Product and Enablement at Alexander Forbes
Jenny Gordon, Head: Technical Advice, Investments, Product and Enablement at Alexander Forbes

Jenny Gordon, Head: Technical Advice, Investments, Product and Enablement at Alexander Forbes

Members of retirement annuity funds with surrender values lower than R15 000 may now withdraw the full amount, after this year’s Budget Review saw an increase from R7 000.

It is well known that a member may not generally withdraw from a retirement annuity fund until normal retirement age of 55. On retirement at least two thirds of the retirement interest must purchase an annuity.
The exceptions are either a de minimis surrender value, emigration, three years uninterrupted non-residency or expiry of a temporary residence visa.

The change was published in the Government Gazette on 28 May 2021, effective from 1 March 2021. Paragraph (b)(x)(cc) in the definition of retirement annuity fund provides for a de minimis surrender value so that members who are unable to continue contributing, can recoup some of their contributions, without their being eroded over time by charges.

Since it is a withdrawal benefit and not a retirement benefit, it will be taxable on the withdrawal table. This is applicable to members under age 55. Those over the age of 55 have access to the de minimis cash lump sum amount of R247 500 which is taxable on the retirement table, to the extent that their total fund value does not exceed that amount.

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